There’s something to be said for boring stocks.
Not everything in a portfolio is going to grow like gangbusters all the time. To balance out growth stocks that are sensitive to pullbacks in the economy, it’s also good to have a smattering of defensive plays — such as water stocks.
Because people and businesses will need water regardless of economic conditions, water infrastructure companies can form a sound bulwark. While it’s unlikely that utilities will outperform growth stocks when the market is doing well, you’ll be glad to have utilities during market downturns when riskier stocks are out of favor.
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The U.S. needs $625 billion in water infrastructure spending over 20 years, according to the Environmental Protection Agency. Aging infrastructure poses a challenge to meeting demand for water even as the need to deal with a group of chemicals known as PFAS, often called “forever chemicals,” in the water system gains attention.
But water infrastructure needs go beyond just drinking water. Artificial intelligence data centers require enormous amounts of water to cool the computers that do AI calculations.
All of this creates a multi-decade investment case for companies involved in all sorts of water-related businesses.
“Physical network upgrades for leak prevention and contaminant compliance lead the agenda, alongside surging water needs for data centers, power generation and advanced solutions like desalination,” says Matteo Facchi, a portfolio manager at Azimut Group.
“Through water equities, investors access a blend of recession-resilient cash flows and secular growth fueled by the massive capital required to address global water stress and ensure stringent water quality,” he says.
With that in mind, here’s a look at seven top water stocks and funds:
| Stock/ETF | Forward dividend yield | Market capitalization |
| American Water Works Co. Inc. (ticker: AWK) | 2.9% | $24 billion |
| Veolia Environnement SA (OTC: VEOEY) | 4.3% | $30 billion |
| Xylem Inc. (XYL) | 1.6% | $27 billion |
| Pentair PLC (PNR) | 1.4% | $12 billion |
| Global Water Resources Inc. (GWRS) | 4.2% | $214 million |
| Invesco Water Resources ETF (PHO) | 0.7%* | $2 billion** |
| First Trust Water ETF (FIW) | 0.8%* | $1.7 billion** |
*30-day SEC yield as of May 22.
**Assets under management as of May 22.
American Water Works Co. Inc. (AWK)
AWK is among Facchi’s top picks for water infrastructure stocks.
American Water Works is one of the largest utilities of any type and is bigger than some electricity providers.
As the largest regulated water and wastewater utility in the U.S., the company provides services to residences, public buildings and businesses.
It provides drinking water and wastewater services to about 14 million people, with regulated operations in 14 states and on 18 military installations.
Those long-term military contracts provide an extra layer of stability, while the company’s growth strategy comes from rate base expansion and acquisitions.
Veolia Environnement SA (OTC: VEOEY)
Another Facchi pick is this French transnational company with 110 million drinking water customers.
The company is working with Amazon.com Inc. (AMZN) on the tech giant’s first data center in Mississippi that will use reclaimed water for cooling. Planned for completion in 2027, the project will transform effluent from nearby wastewater treatment plants into cooling water, saving 83 million gallons of potable water per year that would otherwise have to come from groundwater sources.
Veolia also says that Amazon Web Services plans to use its water technologies on other Amazon facilities, giving the water company a deep-pocketed customer for the foreseeable future.
Owning American Water Works and Veolia gives investors a global water footprint.
“They pair the purely defensive, regulated stability of American Water Works with Veolia’s diversified exposure across the global water management lifecycle,” Facchi says.
Xylem Inc. (XYL)
Facchi also likes this company, which is named for the plant tissue that transports water and nutrients up from the soil.
Xylem has utility, industrial, commercial and residential customers around the world. The company has offerings spanning the entire water cycle and a successful track record of adding new technologies to its lineup through merger-and-acquisition activity.
Xylem’s future growth is tied to adoption of technology by utilities for management of water supply, reduction of water loss and advanced water treatment.
“Industrial leaders like Xylem perfectly capture the broader evolution of water impacts,” Facchi says.
Pentair PLC (PNR)
Over the years, this water treatment company has amassed a large stable of brands serving commercial, infrastructure, industrial, residential and agricultural customers.
It provides filtration, pump equipment, spray systems, commercial ice solutions, water and beverage equipment, water treatment components, and residential pool and spa equipment.
The company has a global footprint, with locations in North America, Europe, Asia, the Middle East and Australia, allowing it to take advantage of the global need for water solutions.
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Global Water Resources Inc. (GWRS)
This pure-play water resource management company owns and operates 39 systems that provide water, wastewater and recycled water services to utilities operating in communities around metropolitan Phoenix and Tucson, Arizona.
This footprint positions the company in areas that have experienced some of the fastest population growth in the U.S., expanding the need for its water services.
Global Water Resources recycles more than 1 billion gallons of water each year and distributes recycled water. That capability and its active M&A program may bode well for the company as developers of new subdivisions will have to turn to recycled or imported water in addition to underground water.
Invesco Water Resources ETF (PHO)
Beyond water utilities, which are a bedrock for communities around the world, other types of companies are working on technology for water conservation and purification.
To help capture this value, Wall Street has created a number of mutual funds and exchange-traded funds (ETFs) that can broaden investor reach and reduce risk.
Investors who want to go the ETF route, either in lieu of individual stocks or in addition to them, can consider this fund. It invests in companies that create products that conserve and purify water for homes, businesses and industries.
With roughly $2 billion in assets under management, this U.S.-focused ETF has AWK and XYL in its portfolio and also contains many other companies in the Nasdaq OMX US Water Index.
PHO has an expense ratio of 0.59%, or $59 in annual fees on a $10,000 investment.
First Trust Water ETF (FIW)
This well-established water fund tracks the ISE Clean Edge Water Index, which contains companies that derive a substantial portion of their revenues from the potable water and wastewater industry.
Companies in the index are involved in water distribution; infrastructure such as pumps, pipes and valves; purification and filtration; and ancillary services like consulting, construction and metering.
With $1.7 billion in assets under management, the fund isn’t far behind PHO in terms of size, which is an important metric when judging a fund’s liquidity and durability. It has an expense ratio of 0.5%.
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7 Best Water Stocks and ETFs to Buy originally appeared on usnews.com
Update 05/26/26: This story was previously published at an earlier date and has been updated with new information.